Follow the money

psylichon

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Oct 31, 2007
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#1
Ok, so I'm a little confused with how money flows with both V1 and V2 iPhones.

So the first iPhone... unsubsidized... $6/400. Apple made out on residuals from the monthly plan, AT&T made out by getting the money up front and getting tons of converts from having the hottest phone on the market. My question: Did the money go to different places depending on whether you bought it from Apple or AT&T?

Now, jump ahead to the new iPhone... subsidized by AT&T. Even the ones sold at Apple ... AT&T makes out on the increased data plan rate and not having to give residuals to Apple anymore, Apple makes out from the Appstore (let's face it, the iPhone is now an app delivery system for them, much like the iPod was a way for them to sell music).

So now with the new model it's even more confusing to me how the money goes. How does AT&T make money on phones sold at Apple stores? And I'm still having a hard time imagining Apple employees answering questions about AT&T plan pricing... can anyone explain this dynamic a little better to me?
 

acosmichippo

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#2
this is how i understand it (could be way off-base)... I don't think ATT makes any money on any iPhone2s regardless of where they were sold. They cover the huge discount because they'll make their money back with the 2-year contract.

and why would Apple employees not answer questions about ATT plan pricing? It's not much more complicated than the v1 plans (if at all).
 

psylichon

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#3
Yeah, but Apple didn't have to deal with V1 plans at all... they just said "take it home and connect with iTunes." Their responsibility increases quite a bit this time around.

And the way I understand subsidizing is this: AT&T buys the phone at full price (>$500 for the 8GB based on rumors) and sells it for $200, making the money back and then some on the voice/data plan. This works traditionally because you couldn't directly buy handsets from the manufacturers, but with Apple it's different. So how's that work?
 

acosmichippo

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#4
i bet ATT will compensate Apple for every one they sell at the subsidized price.
 

psylichon

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#5
Imagine it like this... if AT&T sells the phone for $200, they bought it for over $500 and are subsidizing it. if Apple sells one for $200, then AT&T should be giving Apple the remainder of the unsubsidized price, right?

edit: like hippo just said.

I guess the reason this is all weird is because you were never able to buy a subsidized phone directly from the manufacturer before... you always paid the full unsubsidized price, right? So I guess yet again Apple is changing the game slightly... even if it is more in line with "the old system"
 
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Hayesimus

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#6
I just want a free one. Make it so...
 

jjvaldez

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Jul 3, 2007
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#7
hey its happened before... look at the razr it was like 200 now it is free... it can happen to the iPhone too...
 
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Hayesimus

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#8
but I was thinking more like... NOW rather than after everybody and there brother is on their 3rd or 4th one. :p
 
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Hayesimus

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#10
Nice PICage. :p